Warehouse lending conditions continued to improve in the second quarter with commitment volumes rising for most players—thanks in large part to a mini-refinancing wave sweeping the nation.
According to exclusive survey figures compiled by National Mortgage News, industrywide commitments fell slightly to roughly $27 billion at June 30 from the same period a year ago. (NMN assumes it has captured 70% of the warehouse market.)
But the results belie the fact that PNC Bank is in the process of winding down the warehouse division of National City, once a top player in the market. Also Colonial Savings, the nation’s No. 2 ranked warehouse provider, is now part of BB&T, which cut some of Colonial’s customers loose when it took over the troubled bank last fall.
In other words, in the second quarter of 2009 National City and Colonial were still actively making warehouse lines but in NatCity’s case, no more. (PNC will wind down NatCity’s warehouse unit for good by yearend.) With the short-term outlook for residential loan production greatly improved from a few months ago (some lenders think the industry could wind up just shy of last year’s $1.9 trillion origination mark), warehouse lines are in demand.
Of course, warehouse providers, for the most, continue to be in the driver’s seat when it comes to terms. Michele Perrin, who brokers warehouse lines through her firm Perrin & Associates, sees conditions improving slightly for nonbank borrowers.
She recently brokered a line of credit for a homebuilder-owned lender, receiving multiple offers on the loan, something that probably wouldn’t have occurred a year ago.
She and Larry Charbonneau, who also advises clients on warehouse deals, both cite a major positive coming for the business: the entry of MetLife Bank into the sector.
The New Jersey-based bank, whose mortgage division is based in Texas, plans to officially launch its new warehouse division in the fourth quarter and is in the process of hiring between four and six additional staffers for the business.
According to Brian Lewand, managing director and head of capital markets for MetLife, “We plan to have a meaningful presence in the warehouse market.” Lewand, who has been with MetLife for 15 years, declined to give volume estimates on how fast the company might grow in regard to warehouse commitments but noted that the bank plans to be a national player in the business.
MetLife recently hired two warehouse officials who worked at Sovereign Bank of Pennsylvania. One official left Sovereign recently, the other several months ago. Their departure from Sovereign, though, has raised concerns about that bank’s commitment to the business. (The bank, which is owned by Santander of Spain, declined to comment.)
MetLife plans to extend credit to nonbank mortgage lenders and also hopes to purchase closed loans through its new correspondent division.
An increasing number of banks are considering getting into the warehouse lending business these days, but many of the regional players will only extend credit to nondepositories operating in their bank footprint.
The largest player in the market continues to be Bank of America, which at June 30 had about $15 billion of commitments. B of A’s figure, however, is an estimate based on reporting done by this newspaper.
The bank, like some warehouse providers, only extends credit to nonbanks selling closed loans to the company on a correspondent basis. These “captive” deals were in vogue during the height of the mortgage crisis but have eased over the past six months.
NMN found that several large warehouse providers, including JPMorgan Chase and Wells Fargo & Co., continue to keep their commitment volumes nonpublic.
